French bid to make Australia submarines fades on US security fearsLeo Lewis in Tokyo

Taking on water: US fears of 'technology leakage' have hurt France's bid to supply Barracuda submarines to AustraliaParis’s bid to build a $35bn submarine fleet for Australia has lost significant ground over fears the French state shipbuilder will not be able to protect highly sensitive US military secrets.

The US military is concerned that submarine maker DCNS may be more prone to technology “leakage” than contractors in competing bids, according to several people close to the situation.“France is in Nato, the politics are delicate and it is true that US weapons have been integrated on to French vessels before,” said one person involved in Pentagon procurement issues. “But with technology this advanced there is real discomfort within the US military about putting it on a French boat.”

The strength of US influence on Australia raises the likelihood that Japan’s 4,000-tonne diesel-electric Soryu vessel could emerge triumphant from a three-way tender process it is contesting fiercely with France and Germany. The Japanese bid is the first of its kind and follows a historic policy change in 2014 that lifted a longstanding ban on Japan exporting arms.Japan weapons export drive

A Japanese national flag flies on a ferry in front of buildings in Tokyo, JapanJapan seeks submarine sale to Australia in first big weapons export in 70 yearsHowever, Sean Costello, chief executive of DCNS Australia, dismissed the suggestion the French offer would be affected by security concerns. “DCNS is France’s sovereign provider of naval technology and has proven systems and procedures in place that protect the sensitive information already provided by Australia,” he said.

Although all three bids have strengths and weaknesses, the offer from Germany’s ThyssenKrupp Marine Systems is also thought to be lagging slightly behind the Japanese offer on technical grounds. The German proposal involves doubling the size of its Type 214 Class vessel, while the Japanese would be selling a model that already exists at the desired size and is in active service.The concerns over the French bid, according to people closely involved in the tender process, centre on the US-built weapon and sensor technology that will lie at the heart of the new submarines.

Australia is preparing to choose between two weapons systems that will form the backbone of the submarine fleet. Only after that decision is made — probably by early April — can the submarine contractor be selected.Whichever weapons system is chosen — one is being offered by Lockheed Martin, the other by Raytheon — the technology will be American.

French submarine

Chuck Jones, chief executive of Lockheed Martin in Asia, played down the idea that a US combat system would limit Australia’s choices and said that a prerequisite of his company’s ability to bid on the weapons tender was that Lockheed would be prepared to work with any of the three submarine makers.

But diplomats say that, on the sidelines of the tender process, Washington has made it increasingly clear over the course of the past six months that it favours the Japanese bid. A Japan-Australia partnership on a high profile military project, say military analysts, would underpin US plans to create a counterbalance to China’s rise in the Pacific.French submarine

The bidding process has highlighted Japan’s inexperience in the global arms market, after a failure to submit a detailed budget plan for the project or identify a project leader to take overall responsibility, according to people close to the situation. Prime Minister Shinzo Abe has twice intervened to tell the bid team to sharpen up its efforts, according to political insiders in Tokyo.Meanwhile, the bid has exposed the fact that its largest contractors, Mitsubishi Heavy Industries and Kawasaki Heavy Industries, have evolved their defence businesses around a single customer — the Japanese Ministry of Defence. Australia has, over the past two months, been laying increasing pressure on Japan to tighten the commercial terms of the bid, lay out a detailed budget and make it clear which company is leading the project.